| Consensus | Actual | Previous | |
|---|---|---|---|
| Month over Month | 0.2% | 0.1% | -0.5% |
| Year over Year | 4.1% | 4.0% | 4.9% |
Highlights
French inflation was slightly weaker than expected in October, according to flash data released on Tuesday, although stubborn service sector inflation could cause a bit of discomfort at European Central Bank headquarters.
Consumer prices rose by 0.1 percent, slightly less than the consensus estimate of 0.2 percent, bringing the annual rate of inflation down to 4.0 percent, sharply lower than the 4.9 percent pace recorded in September.
Base effects accounted for much of the easing; food inflation declined to an annual rate of 7.7 percent from 9.7 percent in September, while energy softened to a 5.2 percent pace from 11.9 percent previously.
However, service price inflation resumed an upward trajectory, rising to a 3.2 percent pace from 2.9 percent in September, outpacing the 3.1 percent outcome of the same month a year ago. The ECB has expressed disquiet over persistent service sector inflation, even as headline measures continue to ebb.
Harmonised inflation, which feeds into eurozone data due later Tuesday, rose by 0.2 percent in October after a 0.6 percent decline previously, but the annual rate declined to 4.5 percent from 5.7 percent in September.
The sharp decline in the HICP rate could raise hopes of a steeper-than-expected decline in eurozone inflation, which is expected to fall to an annual rate of 3.4 percent from 4.3 percent in September. German HICP released on Monday eased by more than forecast, although Spanish inflation ticked higher.
But nothing short of an unexpected re-emergence of price pressures is likely to sway market expectations that eurozone rates could be on hold for the foreseeable future. European Central Bank Vice President Luis de Guindos repeated the company line on Monday that, while inflation remains too high, rates have reached a level that, if maintained, will assist with bringing inflation back to target.
The latest data put the French RPI at 0 and leaves the RPI-P at 10, meaning that overall economic activity is performing within market expectations.
Consumer prices rose by 0.1 percent, slightly less than the consensus estimate of 0.2 percent, bringing the annual rate of inflation down to 4.0 percent, sharply lower than the 4.9 percent pace recorded in September.
Base effects accounted for much of the easing; food inflation declined to an annual rate of 7.7 percent from 9.7 percent in September, while energy softened to a 5.2 percent pace from 11.9 percent previously.
However, service price inflation resumed an upward trajectory, rising to a 3.2 percent pace from 2.9 percent in September, outpacing the 3.1 percent outcome of the same month a year ago. The ECB has expressed disquiet over persistent service sector inflation, even as headline measures continue to ebb.
Harmonised inflation, which feeds into eurozone data due later Tuesday, rose by 0.2 percent in October after a 0.6 percent decline previously, but the annual rate declined to 4.5 percent from 5.7 percent in September.
The sharp decline in the HICP rate could raise hopes of a steeper-than-expected decline in eurozone inflation, which is expected to fall to an annual rate of 3.4 percent from 4.3 percent in September. German HICP released on Monday eased by more than forecast, although Spanish inflation ticked higher.
But nothing short of an unexpected re-emergence of price pressures is likely to sway market expectations that eurozone rates could be on hold for the foreseeable future. European Central Bank Vice President Luis de Guindos repeated the company line on Monday that, while inflation remains too high, rates have reached a level that, if maintained, will assist with bringing inflation back to target.
The latest data put the French RPI at 0 and leaves the RPI-P at 10, meaning that overall economic activity is performing within market expectations.
Market Consensus Before Announcement
Strongly negative base effects should see an expected provisional 0.2 percent monthly rise in prices reduce the annual inflation rate from 4.9 percent to 4.1 percent.
Definition
The consumer price index (CPI) is a measure of the average price level of a fixed basket of goods and services purchased by consumers. Monthly and annual changes in the CPI represent the main rates of inflation. The national CPI is released alongside the HICP, Eurostat's harmonized measure of consumer prices. A flash estimate was released for the first time in January 2016 and is now published towards the end of each reference month.
Description
The consumer price index is the most widely followed indicator of inflation. An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact. In countries where monetary policy decisions rest on the central bank's inflation target, the rate of inflation directly affects all interest rates charged to business and the consumer. As a member of the European Monetary Union, France's interest rates are set by the European Central Bank.
France like other EMU countries has both a national CPI and a harmonized index of consumer prices (HICP). The HICP is calculated to give a comparable inflation measure for the EMU. Components and weights within the national CPI vary from other countries, reflecting national idiosyncrasies.
Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets - and your investments. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.
By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.
France like other EMU countries has both a national CPI and a harmonized index of consumer prices (HICP). The HICP is calculated to give a comparable inflation measure for the EMU. Components and weights within the national CPI vary from other countries, reflecting national idiosyncrasies.
Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets - and your investments. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.
By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.
